About Leaseback Properties

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There is a lot of interest in leasebacks this year and the number of enquiries for this form of property investment continues to rise.

French Investment Property has apartments in several projects for sale and we are often asked if these are better or worse investment than conventional properties.

These are what we think are the plus points:

  • Even the low yields, at 4% net of all costs, represent a better level of income than conventional properties, with the possible exception of smaller ski properties.

  • The fact that the rents are guaranteed for 9 years means that you can lock a good return over a medium term period - this is what we are all trying to achieve with investment products!

  • If you use a mortgage, you can double the return on your investment - see 'The Magic of Leverage' section in "About Buy-To-Let Properties" on this website.

  • The bigger leaseback operators have holiday plans where, as an owner, you can rent apartments at a discount in their other resorts. This can be a very valuable perk.

  • The saving on VAT is real, although you should check the resulting price per square metre against a conventional property in the same area.

These are the negative points:

  • Resale of the apartment before 20 years has elapsed will result in having to repay pro rata the VAT saved.

  • You have to be sure that the operator will be able to honour the rental agreement over the next 20 years.

  • Resale of an apartment in a holiday complex is not as straightforward as the resale of a conventional apartment. The buyer population may not be as large.

NOTE: Your home is at risk if you do not keep up the repayment on a mortgage loan or other loan secured on it. The sterling equivalent of your liability under a foreign currency mortgage may be increased by exchange rate movements.

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